Terminating A Real Estate Contract By Buyer

Terminating a real estate contract as a buyer is legally allowed in many situations—but it must be done correctly to protect your earnest money and avoid legal consequences.

Here’s a step-by-step guide:

✅ 1. Understand Your Legal Grounds for Termination

Most contracts allow the buyer to cancel under certain contingencies:

🧾 Common Buyer Contingencies:

🕒 2. Act Within the Deadline

Each contingency has a timeframe written into the contract (e.g., “10 days after contract acceptance”).

⚠️ Missing a deadline may mean forfeiting your earnest money.

✍️ 3. Submit Written Notice to Terminate

• Use a formal “Notice of Cancellation” or “Contract Termination Notice”.

• This should clearly cite the contingency you’re using to cancel.

• Your agent or real estate attorney should deliver this in writing, often using your state’s standard form.

💵 4. Request Earnest Money Refund

If you’re within your rights:

• You should be refunded your earnest money deposit.

• The title or escrow company usually requires a signed release form from both parties.

⚠️ 5. Be Aware of the Risks

• If you cancel outside a valid contingency, the seller may:

  • Keep your earnest money.

  • Potentially sue for breach of contract (rare, but possible depending on damages and local laws).

📋 Sample Reason for Termination

“Per Section 9 of the Purchase Agreement, Buyer is terminating the contract based on unsatisfactory results of the home inspection conducted on [date]. Notice is provided within the inspection contingency period.”

Here’s a sample real estate contract termination notice for a buyer canceling under the inspection contingency. This can be adjusted depending on your reason (e.g., financing, appraisal, etc.):

🧾 Sample Buyer’s Termination Notice (Under Inspection Contingency)

[Buyer’s Name]
[Your Full Name]
[Your Address]
[City, State ZIP]
[Email Address]
[Phone Number]

Date: [Insert Date]

To:
[Seller’s Full Name]
[Seller’s Address]
[City, State ZIP]

RE: Termination of Purchase Contract for Property Located at:
[Full Property Address]

Dear [Seller’s Name],

Pursuant to the Residential Purchase Agreement dated [Insert Original Contract Date], this letter shall serve as formal notice that the Buyer elects to terminate the contract under the terms of the Inspection Contingency.

Following the home inspection conducted on [Insert Inspection Date], the Buyer has determined that the condition of the property is not acceptable, and as allowed under the contingency period outlined in the agreement, the Buyer is exercising their right to terminate the contract.

We respectfully request that the earnest money deposit in the amount of $[Insert Amount] be refunded in full to the Buyer, and that any necessary release documents be signed and returned promptly.

Please consider this notice effective as of the date above.

Thank you for your time and consideration.

Sincerely,
[Buyer’s Full Name]
(Signature)
Date: _______________

📌 Notes:

• Your real estate agent can (and usually should) submit this on your behalf using the proper form required in your state (e.g., “Cancellation of Contract”).

• Check your contract for specific requirements on notice delivery (email, certified mail, etc.).

• If you’re using a different contingency (financing, appraisal, etc.), adjust the wording accordingly.

📌 Pro Tips

• Never rely on verbal agreements—always get everything in writing.

• If you’re unsure of your rights, consult a real estate attorney before terminating.

 

Craig Cherney is a trusted client advisor and a sought after real estate lawyer and expert witness who is hired by the nation’s top Real Estate Litigation Attorneys to help resolve their litigated real property matters.  Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. Craig Cherney, Esq. Expert Witness Real Estate. 480-399-2342.  If you are litigating an easement case, Craig Cherney might be able to help you advance and win your case.